If you or your employees use a vehicle for work, you’ll likely need a type of business insurance called commercial auto insurance. While rates vary, the average policy costs between $142 and $187 per month. Of course, your costs will depend on various factors, some that you can control and others that you can’t. We’ll dive deeper into the average commercial auto insurance costs you can expect to pay for your work vehicles.
What is the average cost of commercial auto insurance?
According to Progressive Commercial Insurance, the 2020 national average cost of commercial car insurance is $187 per month for both business auto and commercial customers. The massive insurer lists rates for business autos in services (such as cleaners, restaurants and shops) at $188 per month, while contractors like carpenters and electricians pay $186 per month on average.
Another insurer, Insureon, says the median cost for commercial car insurance is $142 per month. That’s $1,704 annually, though some insurance carriers price policies on a six-month basis. (Progressive’s median price was listed at $153, which is closer to the Insureon number.)
Insureon states that its premium price is for $1 million in coverage, but you’d need to get a quote to discuss policy options like comprehensive and collision coverage. Progressive says both comprehensive and collision coverage are included, but you’d need to get a quote to determine the liability limit amounts.
As you can see, many factors affect the average cost of commercial auto insurance, and each carrier prioritizes what it views as the most important options and coverages.
Did you know? Some insurance costs are tax deductible, including commercial car insurance premiums and expenses that go beyond your deductible.
What affects your commercial auto insurance rates?
You can tell by the variation in average and median insurance costs that many factors affect policy pricing. Just as with choosing any type of business insurance, you have to consider many variables about your business and the vehicle you’re insuring to get an accurate quote.
These are some variables that affect commercial auto insurance rates:
- Location: Your location will play a significant role in insurance costs, as some states are more expensive than others.
- Vehicle type: The commercial vehicle’s year, make and model will affect the price. Bigger, heavier vehicles typically cost more to insure than smaller, lighter ones.
- Miles driven: How much you drive during the policy term will also affect your rates. The more you drive, the more expensive your premium will be because you’re on the road more, thus increasing the chance of an accident.
- Driving record: Your driving record and your employees’ driving records will affect your rates. Better driving records are rewarded with lower rates.
- Industry: What you do for a living can affect your vehicle rates.
- Number of vehicles: Having a fleet of vehicles increases your overall rates but may lower the per-vehicle rate.
To get an accurate estimate, work with your insurance carrier on a quote that considers all pertinent details about the vehicles and drivers.
FYI: The best liability insurance providers will rate your premium based on the driver with the worst driving record, to cover the biggest risks. Consider assigning the drivers with the worst records to the least expensive vehicles.
How to keep your commercial auto insurance costs down
Commercial auto insurance is more expensive than personal car insurance. According to PolicyGenius, the average personal auto insurance policy is about $137 per month, or $1,652 annually. With such a discrepancy, many small business owners look for ways to keep costs down, since commercial auto insurance can be an expensive line item in a budget.
Here are some tips to keep your commercial auto insurance costs down:
- Vet your drivers. Hire drivers with good driving records only. Perform regular drug testing to make sure employees don’t drive under the influence, which can lead to tickets and accidents, driving up your insurance costs.
- Install driving trackers. Some insurance carriers will offer discounts to companies that use driving trackers that track speed and sudden maneuvers. These devices may also have GPS capabilities so you can see if drivers are taking unnecessary detours. You can learn about the best GPS fleet tracking services in our reviews.
- Find a cheaper home base. Since rates are influenced by location, you can save money if you base your commercial vehicles out of a less expensive area. This might not be feasible for some businesses, such as a restaurant doing deliveries, but if possible, move your fleet to a lower-priced location.
- Limit miles driven. Generally, the less you drive, the lower your insurance rates are. While you can’t eliminate mileage for work vehicles, you can reduce miles driven with GPS route planning and grouping deliveries by proximity.
- See about a business use policy. You may not need a commercial auto insurance policy; in some cases, a personal car insurance policy with a “business pursuits” designation will suffice. If the vehicle is seen primarily as a personal vehicle, your rates will be lower.
- Bundle as a fleet. If you have more than one commercial vehicle, bundle them as a fleet if possible to qualify for discounted premiums. Some carriers will have a minimum number of vehicles required for a fleet, so this isn’t always an option.
- Ask about other business insurance bundle discounts. Some carriers will offer discounts if you’ve purchased multiple business policies through them. Just like home and auto bundles for personal insurance, you can also bundle commercial insurance policies.
Choosing the right coverage
Don’t choose your commercial auto insurance policy based solely on price. While you want to get the best deal, it’s even more critical to ensure your business is protected from the various risks that come with driving commercial vehicles.
It’s essential to choose the proper coverage protections, including sufficient liability, comprehensive and collision coverage that will pay for damages to your vehicle – or replace it if needed. You’ll also want to get rental coverage so that your business activities don’t grind to a halt when your commercial vehicle is in the shop.
Remember that the best commercial insurance isn’t always the cheapest; it’s the one that provides the most robust financial protections for you and your business and is there for you when you file an insurance claim.